Category Archives: Economic Research

Economic Research

PSCE – January 2021

By | | ,
Comments Off on PSCE – January 2021

Overall

Private sector credit (PSCE) increased by N$224.1 million or 0.2% m/m in January, bringing the cumulative credit outstanding to N$105.6 billion. On a year-on-year basis, private sector credit grew by 1.50% y/y in January, on par with December’s increase of 1.58% y/y. Cumulative credit extended to the private sector over the last 12-months amounted to N$1.56 billion. Of this cumulative issuance, individuals took up N$1.4 billion worth of debt while N$428.8 million was extended to businesses. The non-resident private sector decreased its borrowings by N$312.9 million.

Credit Extension to Individuals

Credit extended to individuals fell by 0.7% m/m, but rose 2.5% y/y in January, growing at almost half the pace than the 4.5% y/y increase recorded in December. All categories recorded a contraction on a monthly basis. Individuals paid back overdrafts during the month, resulting in a 1.7% m/m decrease in this category, but rose 2.3% y/y. Instalment credit declined by 1.3% m/m, while mortgage loans extended to individuals contracted by 0.5% m/m.

Credit Extension to Corporates

Credit extended to corporates grew by 1.0% y/y in January, after contracting by 1.2% y/y in December. On a month-on-month basis, credit extension to corporates rose 1.3% in January. The month-on-month growth in corporate credit was primarily driven by increased uptake in overdraft facilities which registered growth of 3.7% m/m and 14.2% y/y. The Bank of Namibia indicated that this was mostly due to increased demand for short-term credit facilities to finance their working capital requirements during the month. Demand for instalment credit by corporates remained low, increasing by 1.5% m/m, but contracting 12.8% y/y. Mortgage loans to corporates, grew by 2.7% m/m, but contracted by 3.2% y/y, the lowest annual contraction rate in nine months.

Banking Sector Liquidity

The overall liquidity position of commercial banks deteriorated further during January, declining by N$474.3 million to reach an average of N$775.1 million. According to the Bank of Namibia, the decline is due to periodic corporate tax payments to the government. Commercial banks continued to utilize the BoN’s repo facility in January, with the balance of repo’s outstanding falling from N$1.04 billion at the start of January to N$845.7 million at the end of the month.

Reserves and Money Supply

Broad money supply rose by N$11.7 billion or 10.2% y/y in January, as per the BoN’s latest monetary statistics release. Foreign reserve balances increased notably in January, up 8.3% m/m or N$2.63 billion to a total of N$34.4 billion. The BoN ascribed the increase to SACU receipts during the month.

Outlook

Overall, PSCE growth remains extremely subdued and was very much in line with the growth seen in December on a year-on-year basis, increasing by 1.5%. Rolling 12-month issuance is down 77.0% y/y to N$1.56 billion as at the end of January, with individuals taking up most (92.6%) of the credit extended over the past 12 months.

We expect the Bank of Namibia’s MPC to keep interest rates at its current level for the most part of the year, with the South African FRA curve pricing in the possibility of a 25 bp hike towards the end of the year. Although inflation and other market conditions will likely inform the MPC’s decision. Further rate cuts are likely to have very little, if any, impact on PSCE growth, as rates are already at historically low levels. Significant PSCE growth is likely to only return once economic conditions improve meaningfully.

NCPI – January 2021

By | | ,
Comments Off on NCPI – January 2021

The Namibian annual inflation rate ticked up to 2.7% y/y in January, following the 2.4% y/y increase in prices recorded in December. Prices in the overall NCPI basket increased by 0.9% m/m. On a year-on-year basis, overall prices in nine of the twelve basket categories rose at a quicker rate in January than in December, while the other three recorded slower rates of inflation. Prices for goods increased by 3.2% y/y while prices for services increased by 2.0% y/y.

Food & non-alcoholic beverages, the second largest basket item in weighting, accounted for 0.9 percentage points of the total inflation figure. Food and non-alcoholic beverage prices increased by 5.2% y/y, moderating from the 7.6% y/y recorded in December. Prices in twelve of the thirteen sub-categories recorded increases on an annual basis. The largest increases were observed in the prices of fruits which increased by 13.6% y/y and vegetables which increased by 12.4% y/y. The fish sub-category meanwhile saw a marginal price decrease of 0.3% y/y in January.

Alcoholic beverages and tobacco prices, making up approximately 12.6% of the overall inflation basket, was the second highest contributor to the annual inflation rate in January, with prices of the basket item increasing by 0.8% m/m and 5.0% y/y. The main driver in this basket category was tobacco prices which increased by 10.3% y/y while alcohol prices rose by 3.8% y/y.

The miscellaneous goods & services basket recorded inflation of 6.7% m/m and 6.5% y/y, and contributed 0.35 percentage points to the overall annual inflation figure. The financial services sub-category recorded a rather hefty price increase of 27.2% m/m and 24.0% y/y. The four other subcategories (personal care, personal effects, insurance and other services) all recorded quicker inflation on a month-on-month basis but recorded slower inflation on a year-on-year basis.

Despite the second consecutive uptick, the Namibian annual inflation rate continues to trend lower than that of neighbouring South Africa’s inflation rate. According to the NSA, the prices for the rental payments for dwellings sub-category rose by only 0.6% y/y in January. As rental payments make up a large portion (23.3%) of the CPI basket, the low inflationary adjustment means that Namibian annual inflation in 2021 is likely to remain well below Namibia’s long-run average. IJG’s inflation model forecasts an average inflation rate of 2.9% y/y in 2021 and 4.3% in 2022, indicating a steady increase in the inflation rate over the next two years. We remain of the view that the largest upside risk to this forecast is higher food costs and fuel prices.

Building Plans – January 2021

By | | ,
Comments Off on Building Plans – January 2021

A total of 122 building plans were approved by the City of Windhoek in January, representing a 6.1% m/m increase from the 115 building plans approved in December. In monetary terms, the approvals were valued at N$84.0 million, an 11.5% m/m increase,  while buildings with a value of N$57.6 million were completed during January, a 79.9% m/m increase. 2021 is off to a slower start in terms of value of approvals, compared to January 2020 when 121 building plans worth N$189.4 million got the nod. On a twelve-month cumulative basis, 2,283 building plans worth approximately N$1.75 billion were approved, an increase in number of 14.7% y/y, but a decline of 8.5% y/y in value terms over the prior 12-month period.

In terms of number of approvals, additions to properties made up the largest portion of approvals. For the month of January, 71 additions to properties were approved with a value of N$25.7 million, 7 more than the number of additions approved in January 2020. The value of the additions approved in January is however 55.6% lower than those observed in the first month of 2020. 4 additions worth N$890,000 were completed during the month.

New residential units were the second largest contributor to the total number of building plans approved in January. 50 new units worth N$51.3 million were approved in January, representing a 102.9% increase from the N$51.3 million worth of approvals in the first month of 2020. On a 12-month cumulative basis, residential units recorded a 74.6% y/y increase in value. 30 new residential units worth N$57.6 million were completed during the month.

Only 1 new commercial unit, valued at N$7.0 million, was approved in January. This compares to 6 units valued at N$136.0 million approved in January 2020. On average over the last 20 years, 4 commercial units valued at N$26.5 million were approved in the first month of the year. On a rolling 12-month perspective, the number of commercial and industrial approvals have slowed to 36 units worth N$202.2 million as at January, compared to the 51 approved units worth N$641.6 million over the corresponding period a year ago. No commercial and industrial units were completed in January.

The 12-month cumulative number of building plans approved increased by 14.7% y/y in January. A total of 2,283 building plans to the value of N$1.75 billion were approved over the last 12 months which represents a decline in value terms of 8.5% y/y. Additions to properties have made up 68.9% of the cumulative number of approvals, but only 39.4% of the total value of approvals, indicating that the planned construction activity will mostly consist of smaller building projects. The low single digit number of commercial approvals witnessed over the last 11 months indicates that most businesses are not planning on expanding their existing operations. It is evident that the Namibian construction industry continues to tread water as the value of approvals continues to decline in real terms.